Question 1

The Fed controls the money supply to achieve the policy goals set by the United States International Trade Commission.

Accepted Answer

A) True 
 B)False

Question 2

When a bank's excess reserves are zero:

Accepted Answer

A)  its required reserves exceed its legal reserves.
B)  its liabilities exceed its assets.
C)  its liabilities must be lower than its assets.
D)  its required reserves equal its legal reserves.
E)  it cannot meet its reserve requirement.F) B) and C)
G) A) and E)

Question 3

The Board of Governors of the Federal Reserve is:

Accepted Answer

A)  appointed by the president, and each governor serves a 7-year term.
B)  appointed by the president, and each governor serves a 14-year term.
C)  elected by Congress, and each governor serves a 10-year term.
D)  elected by Congress, and each governor serves a 4-year term.
E)  elected by Congress, and each governor serves a 7-year termF) All of the above
G) A) and D)

Question 4

Assume that the Fed increases the money supply when there is substantial unemployment in the economy.According to the quantity theory of money, if velocity is constant, then:

Accepted Answer

A)  the price level will decrease.
B)  real GDP will decrease.
C)  nominal GDP will increase.
D)  nominal GDP will decrease.
E)  real GDP will remain constant while price level will decrease.F) B) and E)
G) B) and C)

Question 5

The Federal Reserve System divides the U.S.into _____ districts.

Accepted Answer

A)  5
B)  21
C)  6
D)  12
E)  17F) A) and B)
G) A) and C)

Question 6

Which of the following is an intermediate target of the Fed's policies?

Accepted Answer

A)  Exchange rate
B)  Unemployment
C)  Money supply
D)  Interest rate
E)  InflationF) D) and E)
G) A) and E)

Question 7

When the Federal Open Market Committee buys government securities:

Accepted Answer

A)  the reserve requirement of banks decreases.
B)  the reserve deposits of banks decrease.
C)  the excess reserves of banks increase.
D)  the federal funds rate increases.
E)  the legal reserves of banks decrease.F) None of the above
G) C) and D)

Question 8

If you buy for $100 a bond that pays 4.57 percent in annual interest and the current interest yield on the bond rises to 5.13 percent, then the price of the bond has fallen.

Accepted Answer

A) True 
 B)False

Question 9

An individual who holds some of her wealth in the form of money in order to pay rent and buy groceries is illustrating the transactions demand for money.

Accepted Answer

A) True 
 B)False

Question 10

If you believe that the price of U.S.government bonds will soon fall, you will want to increase your speculative money demand.

Accepted Answer

A) True 
 B)False

Question 11

The supply curve of U.S.dollars in the foreign exchange market is:

Accepted Answer

A)  downward-sloping because it is negatively related to U.S.exports.
B)  downward-sloping because it is negatively related to U.S.imports.
C)  upward-sloping because it is positively related to U.S.exports.
D)  upward-sloping because it is positively related to U.S.imports.
E)  horizontal because it is unrelated to foreign demand for U.S.goods and servicesF) A) and C)
G) None of the above

Question 12

The money supply function reflects a positive relationship between the interest rate and the quantity of money supplied.

Accepted Answer

A) True 
 B)False

Question 13

Inflation targeting usually increases the uncertainty about the course of action of central banks, as perceived by the general public.

Accepted Answer

A) True 
 B)False

Question 14

The Federal Open Market Committee consists of:

Accepted Answer

A)  the 12-member Board of Governors.
B)  seven members of the Board of Governors and five district presidents.
C)  the president of the New York district bank and the members of the Council of Economic Advisers.
D)  the chairman of the Board of Governors and five district presidents.
E)  seven members of the Board of Governors and a nine-member board of directors of the district banks.F) B) and C)
G) A) and B)

Question 15

Which of the following government agencies oversees monetary policy in the U.S.?

Accepted Answer

A)  The Federal Reserve System
B)  Congress
C)  The Treasury Department
D)  The Federal Trade Commission
E)  The Department of CommerceF) A) and B)
G) A) and C)

Question 16

Other things equal, an increase in the general price level causes the money demand function to shift to the left.

Accepted Answer

A) True 
 B)False

Question 17

The "secondary credit" of the discount rate is usually lower than the "primary credit, " because it is intended for banks in good financial condition.

Accepted Answer

A) True 
 B)False

Question 18

The Fed controls the money supply in the U.S.economy largely through its ability to influence bank reserves and the money creating power of commercial banks.

Accepted Answer

A) True 
 B)False

Question 19

The Fed usually sets a higher reserve requirement for savings accounts than for checking accounts.

Accepted Answer

A) True 
 B)False

Question 20

Suppose that the Fed decides to decrease the money supply by 0.87 percent.If the velocity of money is constant, then the quantity theory of money predicts that:

Accepted Answer

A)  nominal GDP will remain unchanged.
B)  the quantity of output will rise by 0.87 percent.
C)  nominal GDP will fall by 0.87 percent.
D)  the price level will fall by 0.87 percent.
E)  real GDP will fall by 0.87 percent.F) A) and E)
G) A) and D)

Exam 22: Monetary Policy

If you buy for $100 a bond that pays 4.57 percent in annual interest and the current interest yield on the bond rises to 5.13 percent, then the price of the bond has fallen.

Correct AnswerverifiedShow Answer

The money supply function reflects a positive relationship between the interest rate and the quantity of money supplied.

Correct AnswerverifiedShow Answer

When the Federal Open Market Committee buys government securities:

Correct AnswerverifiedShow Answer

The Board of Governors of the Federal Reserve is:

Correct AnswerverifiedShow Answer

The supply curve of U.S.dollars in the foreign exchange market is:

Correct AnswerverifiedShow Answer

The Fed usually sets a higher reserve requirement for savings accounts than for checking accounts.

Correct AnswerverifiedShow Answer

When a bank's excess reserves are zero:

Correct AnswerverifiedShow Answer

The Federal Open Market Committee consists of:

Correct AnswerverifiedShow Answer

The Fed controls the money supply to achieve the policy goals set by the United States International Trade Commission.

Correct AnswerverifiedShow Answer

Suppose that the Fed decides to decrease the money supply by 0.87 percent.If the velocity of money is constant, then the quantity theory of money predicts that:

Correct AnswerverifiedShow Answer

The Federal Reserve System divides the U.S.into _____ districts.

Correct AnswerverifiedShow Answer

Inflation targeting usually increases the uncertainty about the course of action of central banks, as perceived by the general public.

Correct AnswerverifiedShow Answer

The Fed controls the money supply in the U.S.economy largely through its ability to influence bank reserves and the money creating power of commercial banks.

Correct AnswerverifiedShow Answer

The "secondary credit" of the discount rate is usually lower than the "primary credit, " because it is intended for banks in good financial condition.

Correct AnswerverifiedShow Answer

Which of the following is an intermediate target of the Fed's policies?

Correct AnswerverifiedShow Answer

Assume that the Fed increases the money supply when there is substantial unemployment in the economy.According to the quantity theory of money, if velocity is constant, then:

Correct AnswerverifiedShow Answer

If you believe that the price of U.S.government bonds will soon fall, you will want to increase your speculative money demand.

Correct AnswerverifiedShow Answer

Which of the following government agencies oversees monetary policy in the U.S.?

Correct AnswerverifiedShow Answer

An individual who holds some of her wealth in the form of money in order to pay rent and buy groceries is illustrating the transactions demand for money.

Correct AnswerverifiedShow Answer

Other things equal, an increase in the general price level causes the money demand function to shift to the left.

Correct AnswerverifiedShow Answer

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